When it comes to building long-term financial security, few opportunities have the same potential as your employer’s retirement plan match. Whether you’re just starting your career, navigating mid-career decisions, or managing a high-income strategy, understanding how to maximize your 401(k) employer match can be a critical key to retirement planning.

Why a 401(k) employer match matters

Employer matching contributions are essentially free money added to your retirement savings. Employer matches are most commonly offered through 401(k) plans and are based on a percentage of your salary and your own contributions. For example, a typical match might be 50% of your contributions up to 6% of your salary. Read more about matching contributions from the IRS.

Failing to contribute enough to receive the full match is like leaving part of your paycheck on the table. Matching contributions have the potential to increase your retirement savings over time. Why? Because of the power of compounding interest.

How compounding interest works for you

Compound interest is the engine behind long-term retirement growth. When you contribute regularly—and receive matching funds—your money earns interest, and that interest earns interest.

Here’s a simplified example from the IRS: 

These figures assume a 6% annual return on your initial investment. You can explore your own potential growth using the Ameritas retirement savings calculator. This is a hypothetical example for illustrative purposes only. Actual results may vary.

Investment basics: Terms to know

Before diving into your specific retirement plan paperwork, it’s helpful to understand a few key investment terms that can guide your decisions and help you make the most of your employer-sponsored benefits. Check our retirement plans glossary for more terms.

• 401(k): A retirement savings plan offered by employers that allows employees to contribute a portion of their paycheck before taxes, with potential employer matching and tax-deferred growth.
• Roth 401(k): An employer-sponsored retirement savings plan where employees contribute with money they’ve already paid taxes on, making the contributions and any qualified earnings withdrawals tax-free in retirement.
• Vesting: The process by which an employee earns the right to keep employer-contributed funds in a retirement plan, usually based on years of service.
• Asset allocation: The process of dividing investments among different asset categories, such as stocks, bonds, and cash, to balance risk and reward.
• Risk tolerance: Your comfort level with market fluctuations and potential losses, which helps guide your investment choices.

How can you make the most of your 401(k) employer match at every stage of your professional journey? These tips will help set you up for success.

Newly hired? Start strong, build early

Beginning a new job often comes with a flood of onboarding paperwork, and retirement plan enrollment can easily be overlooked. But this is the moment to set a strong foundation.

Key tips for new employees:

• Enroll immediately: Don’t wait. Some employers offer automatic enrollment, but others require you to opt in.
• Contribute enough to get the full match: If your employer matches up to 6%, aim to contribute at least that amount.
• Understand vesting schedules: Some employers require you to stay for a certain period before you fully own the match. Know your plan’s rules.

Even small contributions can grow substantially over time. For example, contributing just 1% more each year can lead to additional savings. Read our blog to learn more about retirement saving strategies.

For mid-career professionals: Reassess and optimize

Mid-career is a great time to reevaluate your retirement strategy. You may have increased earnings, changed employers or accumulated multiple retirement accounts.

Strategies to consider:

• Increase contributions: Whenever you can, increase your contributions up to the maximum amount.
• Take advantage of catch-up contributions: If you’re age 50 or older, you may be eligible to contribute extra to your retirement plan.
• Consolidate accounts: If you do find yourself with multiple 401(k) accounts, carefully consider your options to simplify management and ensure you’re not missing out on matches. You can leave your old accounts with your previous employer, cash them out (tax penalties may apply), roll them over to your new employer’s plan or roll them over to an IRA.

Also, review your investment allocations and consider diversifying to align with your risk tolerance and retirement timeline.

Pro tip for high earners: Avoid leaving money behind

High-income earners often face contribution limits and complex tax considerations. But employer match strategies still apply.

Advanced tips:

• Maximize salary deferrals: Ensure you’re contributing up to the IRS annual limit ($23,000 for 2025, plus $7,500 catch-up if over 50).
• Understand plan limits: Some plans cap matching contributions based on a percentage of income. Know your plan’s formula.
• Explore Roth options: If offered, Roth 401(k) contributions can provide tax-free growth, which may be beneficial depending on your tax bracket.

Talk with a financial professional

Maximizing your employer match can be one of the most effective ways to potentially grow your retirement savings. But every individual’s situation is unique. Whether you’re just starting out or refining a high-level strategy, speaking with a financial professional can help you make informed decisions.

Use this Ameritas financial professional finder to connect with someone who can guide you through your options and help you build a personalized plan.

Your 401(k) employer match is more than a benefit: it’s a strategic tool for wealth building potential. By contributing consistently, understanding your plan, and leveraging compounding growth, you’re taking the first step to save for your financial future.

Disclosures

Representatives of Ameritas do not provide tax or legal advice. Please refer clients to their tax advisor or attorney regarding their specific situation.

Retirement planning is evolving. As people live longer and markets remain unpredictable, you need financial strategies that offer both stability and flexibility. A recent study by Ernst & Young, a global firm specializing in financial auditing, tax planning and business strategy, highlights how combining annuities, especially fixed indexed annuities (IA) and indexed universal life (IUL) insurance with traditional investments can lead to stronger retirement outcomes.

In this blog, we’ll explore how integrating these tools can help build a more comprehensive and flexible retirement strategy.

The retirement challenge

The research points to a significant issue: by 2030, the U.S. is expected to face a $240 trillion retirement savings gap and a $160 trillion protection gap. These figures emphasize the need for more comprehensive retirement planning. While investment-only strategies are common, they may not be enough to meet future needs.

This study shows that integrating insurance products can help you achieve better financial security in retirement. Let’s start by identifying what these products are.

What is a fixed indexed annuity?

A fixed indexed annuity is a financial product that provides guaranteed¹ income starting at a future date, typically during retirement. You pay into the annuity now, and it begins paying out later, often for the rest of your life. This study focused on IAs with guaranteed lifetime withdrawal benefits, which include features like index-linked growth and principal protection. These features can help the annuity keep pace with inflation and provide more income over time.

Learn more about annuities from Ameritas.

What is indexed universal life insurance?

IUL insurance offers lifelong death benefit coverage and includes a cash value component that grows over time. Unlike term life insurance, which provides coverage for a set period with no cash value, IUL offers lifelong protection and builds cash value. The cash value can be accessed through policy loans or withdrawals² and can serve as a financial resource during retirement.

Learn more about IUL insurance from Ameritas.

The value of integration

The study compared six retirement strategies using simulations across 1,000 market scenarios and three different starting ages (35, 45 and 65). The strategies included:

1. Investment-only
2. IUL and investments
3. IA and investments
4. Single Premium Immediate Annuity (SPIA) and investments (age 65 only)
5. IUL, IA and investments
6. IUL, SPIA and investments (age 65 only)

The integrated strategy that combined IUL and IA with traditional investments consistently outperformed the others in terms of retirement income and legacy value.

Key findings from the study

Higher retirement income: IAs produced significantly higher retirement income³ than investment-only approaches. This is due to features like guaranteed lifetime withdrawal benefits and index-linked growth, which can outperform traditional fixed income investments over time.

Improved legacy outcomes: IUL adds a layer of legacy protection. In addition to its valuable death benefit, its cash value can be accessed during market downturns, reducing the need to sell investments at a loss.² This can help preserve wealth and enhances what you can leave behind.

Tax efficiency: Both IUL and IA offer tax-deferred growth. IUL’s death benefit is generally tax-free, and its cash value can be accessed via policy loans without triggering taxable events.² This can improve your overall financial outcome in retirement.

Flexibility and customization: Integrated strategies allow you to tailor your retirement plan based on your personal priorities, whether that’s maximizing income, preserving wealth or balancing both. For example, higher allocations to IA emphasize income, while more allocated to IUL boosts legacy protection.

Resilience in volatile markets: During market downturns, you can draw funds from an IUL policy’s cash value instead of selling investments at a loss. This flexibility can help maintain portfolio stability and supports long-term growth.

Real-world application

The study included case scenarios to show how these strategies work in practice. One example showed how combining IUL and FIA helped a 65-year-old couple manage longevity risk, market volatility and inflation, all while maintaining a steady income and preserving wealth for heirs, resulting in a 5.5% increase in retirement income and a 29.6% boost in legacy value compared to an investment-only approach.

Another example involved a 35-year-old couple allocating 30% of annual savings to IUL and 30% of assets at age 55 to a IA. This strategy resulted in 13.9% higher retirement income at age 65 and 10.9% more legacy value at age 95 compared to an investment-only approach.

Considerations

While the study presents a strong case for integrating annuities and life insurance into retirement plans, it’s important to consider your individual circumstances.

• Cost: IUL can be more expensive than term life, especially for younger individuals. However, its long-term benefits may justify the cost for those focused death benefits on legacy and financial stability.
• Liquidity: Annuities typically require giving up access to the money you invest in exchange for a guaranteed income. You should assess your need for liquidity before committing to an annuity.
• Customization: Not all annuities or life insurance policies are the same. Features like inflation protection, payout options and fees vary widely. Working with a financial professional can help you choose the right mix for your goals.

Holistic retirement planning

The Ernst & Young study reveals a powerful insight: retirement planning works best when it’s holistic. By integrating annuities and IUL with traditional investments, you can help achieve better financial outcomes.

This approach isn’t about replacing investments but complementing them. Annuities provide stability and predictability, while life insurance offers protection and flexibility. Together, they help form a resilient foundation for a secure retirement.

¹ Guarantees are based on the claims-paying ability of the issuing company.

² Loans and withdrawals will reduce the life insurance policy’s death benefit and available cash value. Excessive loans or withdrawals may cause the policy to lapse. Unpaid loans are treated as a distribution for tax purposes and may result in taxable income.

³ Withdrawals of annuity policy earnings are taxable and, if taken prior to age 59 ½, a 10% penalty tax may also apply.

Representatives of Ameritas do not provide tax or legal advice. Please consult your tax advisor or attorney regarding your specific situation.

In approved states, Ameritas life insurance products are issued by Ameritas Life Insurance Corp. In New York, life insurance is issued by Ameritas Life Insurance Corp. of New York.

In approved states, Ameritas annuities are issued by Ameritas Life Insurance Corp.

Planning for retirement is one of the most important steps you can take to achieve long-term financial independence and security. As you consider your financial future, questions like, “What are the best ways to save for retirement?” and “How much should I save for retirement?” are fundamental to building a strong financial foundation.

The growth potential of your retirement savings hinges on your contributions, the duration of your savings, the investment options you select and starting to save young. While growth is not guaranteed, understanding these factors can help you make informed decisions to maximize your retirement savings.

Here are four key strategies to consider.

1. Take advantage of employer-sponsored retirement plans

If your employer offers a retirement plan, such as a 401(k), take advantage of it. These plans allow you to save for retirement with pre-tax dollars, which can reduce your taxable income and increase your take-home pay. Additionally, many employers offer a matching contribution, which is essentially free money.

When you contribute to a 401(k) or other employer-sponsored retirement plan, your money is invested in a variety of funds, such as stocks, bonds and mutual funds. Over time, the value of these investments have the potential to grow, helping provide you with a nest egg for retirement.

How much should you contribute? While every investor’s situation is different, it pays to know how much just a 1% difference can make. Let’s say you earn $31,000 a year. If you contribute just 1% of your gross earnings to your 401(k), that’s about $6 per week—about the cost of a fancy coffee. After one year, you increase your contribution by just 1%, increasing your contribution to $12 per week, about the cost of a burger.

This chart shows what a difference a simple 1% increase in contribution can make over the years.

For many Americans, the decision of when to claim Social Security benefits can have a lasting impact on retirement income. While benefits can be claimed as early as age 62, waiting until full retirement age (typically 66 or 67) or even age 70 can significantly increase monthly payments. But what if you want to retire before that, say at age 62, but don’t want to lock in a lower Social Security benefit for life?

This is where a single premium immediate annuity can play a powerful, if underutilized, role.

What is the Social Security timing dilemma?

Delaying Social Security has clear financial advantages. For every year you postpone past full retirement age, your benefit grows by 8% until age 70. That’s a guaranteed return that’s hard to match elsewhere.

However, many people retire before they reach full retirement age, sometimes by choice, sometimes by necessity. The challenge becomes: How do you fund those early retirement years without dipping too heavily into your savings or locking in reduced Social Security benefits?

One answer lies in a bridge strategy, temporarily replacing the income Social Security would have provided so you can delay claiming it. And a single premium immediate annuity can be a tool to do that.

Quick summary:

• Goal: Retire early without reducing Social Security.
• Tool: Single Premium Immediate Annuity (SPIA).
• Benefit: Guaranteed income to delay claiming Social Security.

Read our blog to learn how annuities can help make sure you have enough money for retirement.

What is a single premium immediate annuity?

A SPIA is a contract with an insurance company where you pay a lump sum up front in exchange for guaranteed¹, immediate income for a set period or for life. In the context of a Social Security bridge, the most relevant form is a period-certain SPIA, which provides income for a fixed number of years, say, from age 62 to 67.

Here’s how it works:

• You invest a lump sum in your immediate annuity at retirement.
• The insurer begins paying you monthly income right away.
• Payments continue for the duration you specify, such as five or eight years.
• At the end of the period, payments stop—right when you’re able to receive a higher Social Security benefit.

Learn more about single premium immediate annuities from Ameritas.

Why use a SPIA as a bridge strategy?

There are several advantages to using a SPIA to bridge the gap between retiring and claiming Social Security.

1. Maximize Social Security benefits

As mentioned, delaying benefits increases your monthly payment for life. A SPIA gives you the financial breathing room to do that without compromising your standard of living.

2. Predictable, guaranteed income

SPIAs offer certainty in an uncertain market. Unlike investment-based drawdown strategies, your SPIA payments are not subject to stock market risk. That’s particularly valuable early in retirement, when market downturns can do damage to your portfolio, a phenomenon known as sequence of returns risk.

3. Simplicity and ease

With a SPIA, there’s no ongoing investment management. You don’t need to worry about withdrawals, rebalancing or whether your money will last. It just shows up in your bank account, like a paycheck.

4. Preserve other retirement assets

Using a SPIA for early retirement income allows you to leave other retirement assets, like IRAs or 401(k)s, untouched, giving them more time to grow or last longer.

How does a bridge strategy using a single premium annuity work?

Here’s a hypothetical example to see how this strategy works.

Say you’re 62 and want to retire, but you know that waiting until age 67 to claim Social Security will give you $2,500 per month for life, $900 more than if you take it at 62. You need to replace that $2,500 monthly benefit for five years.

You could:

• Withdraw $2,500/month from your investment portfolio.
• Or, invest about $135,000 (based on current interest rates) into a 5-year SPIA that pays you $2,500/month. At the end of the five years, your Social Security kicks in at the higher rate, and your portfolio is still largely intact.

What should I consider before buying a SPIA?

Like any financial tool, SPIAs aren’t for everyone. Before you commit, here are a few things to consider:

• Liquidity. Once you buy a SPIA, the lump sum is no longer accessible. You’re trading a large upfront payment for guaranteed income, not flexibility. Make sure you have emergency funds elsewhere.
• Inflation. Most SPIAs offer level payments, meaning they don’t increase with inflation unless you buy a rider—often at an additional cost. For short bridge periods like 5–8 years, this might be acceptable, but for longer gaps, inflation risk is a real consideration.
• Health and longevity. SPIAs make the most sense if you’re in reasonably good health and expect to live a long retirement. For shorter period-certain SPIAs, this is less of an issue, since payments don’t depend on lifespan.
• Interest rates. SPIA payouts are influenced by current interest rates. If rates are low when you buy it, payouts are lower as well. However, they may still be competitive with what is considered a safe withdrawal rate from a portfolio, especially given the lack of market risk.

What are the pros and cons of using SPIAs vs. drawing from investments?

You might wonder: why not just take systematic withdrawals from your retirement account? That can work, but it comes with more complexity and risk. Here’s a quick comparison:

Planning for retirement is crucial, but it’s equally important to consider how taxes will impact your income streams and overall expenses. We’ll explore the basics of annuity taxation and discuss strategies for implementing a Roth IRA to help ensure you can enjoy a comfortable and tax-efficient retirement.

Understanding annuities

Annuities are popular financial products that provide a steady income stream, often used as part of retirement planning. One feature that can be added to an annuity is the Guaranteed Lifetime Withdrawal Benefit rider. This rider ensures that the annuity holder receives a guaranteed income for life, regardless of market performance.

This feature ensures that the annuity holder will not outlive their income, even if the annuity’s account balance is depleted.

Learn more about the Ameritas Income 10 Index Annuity with a GLWB rider.

Annuity taxation basics

Annuities offer versatile options for retirement planning and can be set up in various ways. They can be purchased within a traditional IRA, allowing for tax-deferred growth with pre-tax contributions and taxable withdrawals during retirement. Alternatively, annuities can be part of a Roth IRA, where contributions are made with post-tax dollars, enabling tax-free withdrawals and no required minimum distributions. Lastly, non-qualified annuities are funded with after-tax dollars, providing flexibility without contribution limits or required minimum distributions, and only the earnings are taxed upon withdrawal.

Each type offers unique tax advantages and flexibility to suit different financial goals and retirement strategies.

Traditional IRA annuities: All distributions are taxable, and distributions before the age of 59½ may be subject to a 10% penalty.

Roth IRA annuities: After five years, distributions after the age of 59½ are tax-free. This includes GLWB withdrawals in the guaranteed phase when the accumulation value has been depleted.

Non-qualified annuities: After 59½, withdrawals from annuities, including those taken from the GLWB rider, are taken as gains first, subject to ordinary income tax. The cost basis is then taken tax-free until depleted. When the GWLB guaranteed payments continue after the accumulation value has been depleted, payments become taxable again. Payments taken from an annuitized contract have an exclusion ratio that applies a portion of cost basis to each payment, spreading the taxes over the span of the payments.

Retirement implications

A Roth IRA can be an important tool in your retirement planning, particularly when it comes to managing your Medicare costs. For high-income Medicare beneficiaries, the Income-Related Monthly Adjustment Amount (IRMAA) is an additional surcharge added to your standard Medicare Part B (medical insurance) and Part D (prescription drug coverage) premiums. This surcharge is based on your Modified Adjusted Gross Income (MAGI) from two years prior, meaning your income level can directly affect the amount you pay for healthcare in retirement.

If your income exceeds certain thresholds, IRMAA can significantly increase your premiums, potentially adding thousands of dollars to your healthcare costs each year. One way to help mitigate this impact is by strategically managing your taxable income in retirement with Roth IRA withdrawals. Since Roth IRA distributions are not counted in your MAGI, they won’t trigger IRMAA surcharges, allowing you to keep your Medicare premiums lower.

By incorporating Roth IRAs into your retirement strategy, you can not only reduce your future tax bill but also avoid unnecessary increases in healthcare costs, ensuring that more of your retirement savings work for you.

Tax strategy 1: Take advantage of Roth 401(k) options

A Roth 401(k) is an employer-sponsored retirement savings plan that allows you to make contributions with after-tax dollars, resulting in tax-free withdrawals in retirement, provided certain conditions are met. It combines features of a traditional 401(k) and a Roth IRA.

Advantages: Since contributions are made with after-tax dollars, any earnings grow tax-free, and qualified withdrawals (after age 59½ and having the account for at least five years) are not subject to federal income tax.

Disadvantages: Since contributions are made with after-tax dollars, you don’t get an immediate tax break like you would with a traditional 401(k). This can reduce your take-home pay and might be less appealing if you prefer the upfront tax deduction.

Tax strategy 2: Early Roth conversion

Advantages:

• By converting a portion of your IRA to a Roth pre-retirement or in the earliest years of retirement, you have many years to offset the taxes paid with tax-free growth. Using your Roth dollars to purchase an annuity, such as the Ameritas Income 10, can create a tax-free income stream you can’t outlive.
• Any Roth dollars you do not use before your death will be passed to heirs free of income tax.

Disadvantages:

• If taxes aren’t paid from an outside source, they can reduce your balance by the amount of tax due. This leaves the client dependent on strong returns to offset the reduction.
• Depending on your earnings at the time, your total tax could be higher on the conversion than it might have been on a taxable income stream.

Tax strategy 3: Last minute Roth conversion

This strategy involves an annuity with a Guaranteed Living Withdrawal Benefit Rider. When you retire, you take withdrawals from your IRA until the accumulated value of your annuity is greatly reduced but not yet depleted. The taxable amount of the conversion is based on the fair market value of the annuity. This valuation can be complex, so consulting the annuity issuer or a tax professional is advisable. Once the contract is converted into a Roth IRA, the remaining payments continue tax-free until your death.

When you convert to a Roth IRA, you must wait five years before withdrawing earnings tax-free. While contributions can be withdrawn anytime, tax-free and penalty-free, earnings taken out during this five-year period are taxable and may incur a 10% penalty if you’re under age 59½, unless an exception applies. After the five-year period, all withdrawals—both contributions and earnings—are tax-free if you’re 59½ or older. Note that the five-year waiting period applies separately to each Roth conversion.

Advantages:

• By waiting until the accumulated value of the annuity is greatly reduced but not yet depleted, the taxable amount of the conversion is minimized. This strategic timing can significantly lower the upfront tax liability, making the conversion more financially manageable.
• When you convert a traditional IRA to a Roth IRA, the GLWB payments are generally not reduced due to the conversion. The GLWB rider ensures a guaranteed income stream, which typically remains consistent regardless of the account type.

Example:

• A 55-year-old male purchases a $300,000 traditional IRA annuity with a GLWB rider.
• At age 65, the client begins withdrawals of $32,816. These payments are taxed as ordinary income.
• When the client is 78, the accumulated value is $18,344. Currently, the client’s tax bracket is 15%. If the client completes a Roth conversion, the federal tax due would be $2,751. After the conversion, the remaining withdrawals of $32,816 will be tax-free.

A Roth IRA can help you reach your financial goals, especially when considering the tax implications of your retirement income. By strategically planning and using Roth conversions, you can potentially reduce your tax burden, helping ensure a more secure retirement.

Representatives of Ameritas do not provide tax or legal advice. Please consult your tax advisor or attorney regarding your specific situation.

Guarantees are based on the claims-paying ability of the issuing company.

Withdrawals of policy earnings are taxable and, if taken prior to age 59 ½, a 10% penalty tax may also apply.

In approved states, annuities are issued by Ameritas Life Insurance Corp. Policies and riders may vary and may not be available in all states. Optional riders may have limitations, restrictions and additional charges.

This information is provided by Ameritas®, which is a marketing name for subsidiaries of Ameritas Mutual Holding Company. Subsidiaries include Ameritas Life Insurance Corp. in Lincoln, Nebraska and Ameritas Life Insurance Corp. of New York (licensed in New York) in White Plains, New York. Each company is solely responsible for its own financial condition and contractual obligations. For more information about Ameritas®, visit ameritas.com.

Ameritas® and the bison design are registered service marks of Ameritas Life Insurance Corp. Fulfilling life® is a registered service mark of affiliate Ameritas Holding Company.

© 2025 Ameritas Mutual Holding Company.

As retirement planning evolves, many individuals are exploring the benefits of converting traditional retirement accounts to Roth IRAs. With Roth options becoming more prevalent in workplace 401(k) plans, the opportunity to secure a tax-free income stream in retirement is increasingly within reach. If you don’t have access to a Roth 401(k) option at your workplace, converting a non-Roth retirement account into a Roth IRA can be an option.

Benefits of a Roth IRA

Having a Roth IRA offers several significant advantages:

Staying under the IRMAA Limit: The Income-Related Monthly Adjustment Amount (IRMAA) affects Medicare Part B and D premiums. For 2024, the IRMAA limit is set at $103,000 for singles and $206,000 for couples. Exceeding these thresholds results in higher premiums. By using a Roth IRA, which provides tax-free withdrawals, retirees can better manage their income levels and stay under these limits, thus avoiding increased Medicare costs.

Minimizing taxes on Social Security benefits: Social Security benefits may be taxable if your income exceeds certain thresholds. Since Roth IRA withdrawals are not counted as part of your income, they can help keep your taxable income lower, reducing or even eliminating the taxes on your Social Security benefits.

Tax planning advantages: A Roth IRA offers the security of knowing the amount of after-tax money available for expenses without concern for changing tax rates. This can be particularly helpful in a fluctuating tax environment, providing stability and predictability for retirement planning.

Understanding Roth conversion rules

Roth conversion rules allow you to convert a traditional IRA to a Roth IRA by paying ordinary income tax on the amount being converted. This process involves a few key steps:

1. Evaluate tax implications: When you convert a traditional IRA to a Roth IRA, the converted amount is treated as ordinary income for the year. It’s crucial to assess whether you can afford the tax bill associated with the conversion. This requires careful planning to avoid pushing yourself into a higher tax bracket.
2. Timing is key: Consider whether time is in your favor. The longer you have until retirement, the more time your investments have to potentially grow tax-free in a Roth IRA. Additionally, converting in a year when your income is lower can minimize the tax impact.
3. Future income projections: Evaluate whether your income will remain the same or increase in retirement. If you expect higher income levels or higher tax rates in the future, converting to a Roth IRA now could be beneficial.

Practical scenarios for Roth conversions

Several scenarios might make a Roth IRA particularly helpful:

• Expecting higher future tax rates: If you expect that tax rates will increase in the future, converting to a Roth IRA now could result in paying taxes at a lower rate.
• Lower income years: Converting during a year with unusually low income can reduce the tax burden of the conversion.
• Estate planning: Roth IRAs do not have required minimum distributions during the account holder’s lifetime, which can be beneficial for those looking to leave a tax-free inheritance to their heirs.

Considerations before converting

Before deciding to convert your IRA to a Roth IRA, consider these critical factors:

• Affording the tax bill: Ensure you have the financial resources to pay the taxes due on the conversion. Using funds from the IRA to pay taxes can diminish the benefits of the conversion.
• Timing: Evaluate the best time for conversion. Spreading the conversion over several years can help manage tax liabilities and avoid pushing into higher tax brackets.
• Future income expectations: Assess whether your income is likely to increase or stay the same in retirement. If you expect to be in a higher tax bracket later, converting now could be helpful.
• Individual scenarios: Consider any specific circumstances, such as changes in employment, inheritance plans, or health considerations, that could influence your decision.
• Five-year rule: The five-year rule for Roth IRAs requires that each conversion must remain in the Roth IRA for at least five years before withdrawals can be made without penalty. This rule ensures that the converted amount isn’t withdrawn too soon, preserving the tax benefits of the Roth IRA.
• Pro-rata rule: The pro-rata rule applies if you have both pre-tax and after-tax funds in your traditional IRA. This rule requires that any conversion be a proportional mix of pre-tax and after-tax dollars, affecting the taxable amount of the conversion.
• Backdoor Roth IRA: A backdoor Roth IRA is a strategy for high-income earners who cannot contribute directly to a Roth IRA due to income limits. This involves making a non-deductible contribution to a traditional IRA and then converting it to a Roth IRA.

Converting a traditional IRA to a Roth IRA can be a strategic move to help secure a tax-free income option in retirement. By carefully evaluating the tax implications, timing and future income expectations, you can make informed decisions that can help enhance your retirement planning.

Leveraging annuities

Using an annuity within a Roth IRA is a strategic way to create reliable income during retirement. Once you retire or choose to start taking income from your annuity, you receive regular, predictable payments for a specified period or for life.

Learn more about our annuity offerings to see if one is right for your situation.

Ameritas can help

If you don’t have Roth 401(k) options, an Ameritas financial professional can help you decide if using a Roth conversion strategy is a good fit for your situation.

A serious illness is one of the few things that can seriously derail your financial aspirations. It can be even more devastating once you retire. Without the buffer of a regular salary, medical costs can quickly eat into retirement funds, potentially affecting your financial stability and long-term goals.

Predicting future care needs can be challenging. It’s hard to put money towards something you may never need.

However, the financial impact of a serious illness is real. One in three Americans is part of a family that would consider their medical bills a financial burden. One in five struggles to pay those bills each month and one in 10 admits they wouldn’t be able to pay them at all. Even for those who have private insurance, many need to stagger their medical payments because they can’t afford to pay off those bills entirely at the end of the month.

Life insurance and annuities can help in covering the costs of a serious illness while simultaneously aiding you in achieving other financial goals.

What about private insurance and Medicare?

Keep in mind that even the best health insurance won’t cover all your health costs. Even with the best planning, there will be unforeseen and unexpected charges. In fact, 62% of Americans who are struggling with medical bills have health insurance.¹ 46% of Medicare beneficiaries being treated for a serious illness face prescription copayments of more than $500 a month.²

Additionally, Medicare doesn’t typically cover long-term care services because it’s designed to provide coverage for acute medical care rather than custodial or ongoing care needs. Long-term care often involves assistance with activities of daily living (such as bathing, dressing and eating) or supervision due to cognitive impairments, rather than medical treatment.

Just to clarify

It’s important to keep in mind that life insurance and annuity riders are not long-term care insurance. Depending on the type of policy, they may differ in purpose, coverage, triggering events and use of funds.

What about my savings?

You may feel that you have enough savings to cover these costs. But which one of your accounts could you liquidate at the precise moment needed without concern about marketability, loss or taxation? These factors may erode the amount you have available to pay your bills.

Many individuals use personal savings, investments and other assets to pay for long-term care services. However, the high cost of long-term care can quickly deplete these resources, leading some individuals to rely on Medicaid once their savings are exhausted.

Life insurance may help

These hypothetical examples illustrate how a permanent life insurance policy with an accelerated death benefit rider can help reach your financial goals, including a way to ease the financial burden of a serious medical condition. This type of rider provides a portion of your policy’s death benefit while you’re still living, giving you more options to deal with the financial strain of your condition.

Accelerated death benefit riders are not a long-term care product and may vary in some states.

Maintaining standard of living: Life insurance example with Mike and Susan

Mike and Susan Anderson are 57 and recently retired. Currently, they own 15 rental properties that provide a nice income – more than they need to support their retirement lifestyle. Mike actively manages the properties, taking care of routine maintenance and minor repairs himself. They’re very thankful for this income, not only because it allowed them to retire early, but also because between getting their four kids raised and sending them to college, they didn’t have the chance to save much. They even have some extra income that they’d like to invest somewhere safe so they can leave something for their kids.

Susan worries about Mike becoming seriously ill and not being able to manage the properties any longer. She knows that they would probably have to end up selling the properties, which would mean losing the income from them.

They’re both in good health and decide to purchase $500,000 permanent life insurance policies with an accelerated death benefit rider, which will address many of their planning needs:

• Permanent life insurance provides funds for the surviving spouse when one of them passes away.
• In the meantime, they can deposit the excess income from their properties into the policies, where it can grow tax deferred, free from short-term market risk. They may access the life insurance cash value down the road if they need extra money for something, such as helping pay for their grandkid’s college educations.³
• When the surviving spouse passes away, their policy death benefit offers an efficient way to pass assets on to the children.
• If either of them experiences a serious medical condition, the accelerated death benefit of the life insurance policy could help cover those expenses. This will help preserve the couple’s assets. For instance, they could use the accelerated benefit to hire someone to manage the rental properties if Mike was too ill to manage them on his own.

By the time they are 73, Mike is suffering from severe arthritis and is unable to care for the rental properties. Even more concerning, he can no longer care for himself.

They decide to file a claim for his accelerated death benefit, providing verification that Mike is unable to perform at least two of the six activities of daily living. He’s eligible to receive half of his policy’s death benefit, or $250,000. He can receive it in a lump sum or in annual $50,000 payments.

They decide to take it as a lump sum. This gives them enough money to pay for a management company to manage their properties while they get them ready to sell. The proceeds from the sales will provide for the rest of their retirement years.

They continue to pay the premiums on both their policies. Upon Mike’s death, his beneficiaries will receive the remaining death benefit, which is guaranteed5 to be a minimum of $50,000. Susan still has the full accelerated death benefit, cash value and death benefit available on her policy.

Protecting loved ones: Life insurance example with Donna and John

Donna is 48 and teaches third grade. Her husband John is also 48. He was forced to retire early due to an unexpected medical condition. Donna spends a lot of her time away from school caring for him. They have enough money to get by, but Donna worries about something happening to her. If she experiences any medical needs in the future, those expenses could eat up money that they might need later in retirement, not to mention what they had planned to leave to their two children.

John’s health issues have taught them both how much impact these expenses can have on their financial plans. They can’t afford more medical expenses in addition to what they are already dealing with. Donna is also concerned about who would provide John’s care if something were to happen to her. She has a small life insurance policy through work but worries that it isn’t enough to cover all his needs.

While getting life insurance for John would probably be too expensive, Donna can buy a permanent life insurance policy that helps address her needs:

• The death benefit will provide for John’s needs if she passes away before him.
• If John should pass away before her and she no longer needs to plan for his care, the death benefit from her policy can now provide an efficient way to leave something for their children when she passes away.
• If she experiences a serious medical condition, she can access the accelerated death benefit rider to help pay for her care, preserving their other assets.
• In the meantime, the cash value of the policy will grow tax deferred. They may access the life insurance cash value down the road if they need to.

Learn more about our life insurance offerings to see if one is right for your financial strategies.

An annuity with a guaranteed lifetime withdrawal benefit rider may help

An annuity can be an integral part of a retirement income strategy. Not only does it give you a place to potentially grow and protect your money as you save for retirement, it also provides a foundation for guaranteed⁴ income once you retire.

A GLWB is a feature offered by some annuity contracts. It provides you with a guaranteed amount of money for life, even if the annuity’s actual value decreases to zero.

Some GLWB riders offer a plus option that you can add for an added charge when you buy your policy. This example shows how, with this option, the amount of money you receive will double if you are unable to care for yourself. This can be another source of money you can use to pay expenses in this type of situation.

Securing guaranteed income: Annuity hypothetical example with Mary

At age 55, Mary buys an annuity with a GLWB rider for $250,000. She chooses the plus option that will double her income if certain healthcare is needed. This will provide her with $33,195 every year once she retires.

• At age 65, Mary retires and decides to begin receiving her guaranteed lifetime income of $33,195 per year.
• At age 68, Mary falls and breaks her hip. Due to several complications, she is confined to a wheelchair for a year and needs help with bathing, dressing and getting around. Her plus option kicks in, and she receives $66,391 this year to help cover the costs of her care.
• At age 78, after receiving $33,195 each year for 12 years and $66,391 for one, Mary’s annuity value becomes depleted. She continues to receive $33,195 each year until she passes away 9 years later.

This example is hypothetical and for illustrative purposes only. Actual results may vary.

Learn more about our annuity offerings to see if one is right for your financial strategies.

Consider your options

The uncertainty about your future health needs emphasizes the importance of planning for the unexpected. Comprehensive long-term strategies should consider various health scenarios, your personal preferences and financial resources. While uncertainty may present challenges in decision-making, you can help mitigate risks by exploring options like life insurance, annuities or a combination of both, to provide flexibility without using all your personal retirement savings. Consult with a financial professional to customize a strategy just right for you.

If you’ve recently found yourself asking the question “when can I retire?”, you’re not alone. Google Trends reports retirement searches have remained consistently high since it first began tracking all search queries in 2004, with a surge occurring in January 2020 and again in January 2022. Despite that interest, many workers remain unsure about when—or even if—they can realistically retire.

According to a 2023 survey of the Employee Benefit Research Institute (EBRI), while just under two-thirds of American workers surveyed felt confident in their ability to have enough money to live comfortably throughout their retirement, only 18% felt very confident. In addition, one-third of workers surveyed planned to delay retirement to age 70 or beyond.

How will you know when you’re ready to retire? Follow these steps for retirement planning to get started. After reviewing it, consider consulting a financial professional to create a plan for retirement customized to your specific needs. If you don’t currently work with a financial professional, you can find one here.

Retirement planning step one: Decide what retirement means to you

The first step in creating a plan for retirement is to understand your goals and aspirations for your post full-time working life. Will you continue working in some other, more limited capacity? Would you like to travel? Take up new hobbies or creative pursuits? Are you considering purchasing a new home or downsizing from your existing residence? Once you truly understand your retirement goals, you’ll be able to create a plan to help you reach those goals much more quickly.

Retirement planning step two: Assess your financial and physical readiness

Assessing your current financial situation might seem like a challenging task, but it’s a critical next step to retirement success. Some elements to consider include:

1. Current short-term and long-term savings. Use this calculator to see the difference saving now versus saving later can make on your retirement nest egg.
2. Current traditional retirement income sources such as pensions, Social Security, investments and retirement accounts.
3. Current and potential alternative income sources such as side businesses or consulting.
4. Active insurance policies including long-term care insurance and disability income insurance that may help defray future healthcare costs.
5. Any debt or obligations that might keep you from contributing to your retirement accounts.

Your current and projected state of physical health is also a key factor in determining when you’re ready to retire. According to the 2020 U.S. Census, the average life expectancy for Americans is just over 77 years. While Medicare recipients can expect to have the majority of healthcare costs covered throughout retirement, it won’t cover all health-related expenses. That cost could potentially exceed $150,000 over the course of your retirement years. The best way to manage those expenses? Build healthcare costs into your retirement strategy—and focus on improving your health day by day.

Retirement planning step three: Maximize your savings

If you plan to continue working for a few more years and want to build your savings for retirement effectively, here are some key strategies to consider:

1. Maximize retirement contributions. Contributions to tax-advantaged retirement accounts such as 401(k)s, IRAs and employer-sponsored plans can help boost your savings over time. Consider contributing the maximum allowable amount to these plans—and if your employer offers a retirement plan with matching contributions, contribute enough to take advantage of the full match. Use this calculator to see if you’re saving enough for retirement.

2. Take advantage of catch-up contributions. If you’re aged 50 or older, you may be eligible for catch-up contributions to accelerate your savings.

3. Invest wisely. In addition to your retirement accounts, adopting a diversified investment strategy can help you reach your long-term goals more quickly. Consult with a financial professional to ensure your investments are appropriately allocated.

4. Develop a retirement-first mindset. Now that you have retirement in your sights, it’s time to focus. Automate contributions to your retirement accounts, reduce expenses and redirect those savings toward your retirement nest egg, and pay down high-interest debt to free up even more money to save for retirement.

5. Reset your timetable for accessing your Social Security benefits. Consider delaying your Social Security benefits if possible. Delaying can lead to higher monthly benefits when you eventually claim them.

6. Consider a side hustle. While this tactic is not for everyone, you could also explore the possibility of earning additional income through part-time work, freelancing or a side business. Channel the extra income into your retirement savings.

Remember that consistency and discipline are key to building a substantial retirement nest egg in a relatively short time frame. Stay committed to your savings goals and adjust along the way to ensure you’re on track to meet your retirement objectives.

Retirement planning step four: Prepare mentally and emotionally for retirement

After working long and hard for a highly anticipated retirement, some new retirees find they’re not as emotionally ready as they thought they would be. Review the following areas and identify if there are any that could potentially cause you concern as you consider retirement:

• Lifestyle changes. Retirement often brings about changes in daily routines, physical activity levels and social interactions. What will it mean for you? Will shifting from a structured work environment transition you into a more sedentary or isolated lifestyle? If so, consider how you might adjust your daily routine to maintain a vibrant life.
• Financial stress. Anxiety or worry over your finances can erode your health and sense of well-being. A strong plan can help ensure that you’re ready for unexpected financial challenges.
• Loss of social interaction. Whether you work in-person or remotely, your current job may offer you a key social network that will be difficult to replicate in retirement. To avoid loneliness and isolation, consider what social connections you can nurture or begin to help maintain your physical and mental health.
• Health status. Once again, good health is a critical factor to a successful retirement experience. It ensures you’re able to get out and enjoy what you’ve worked so long to secure. It’s never too early to make your health a priority.

Start your journey today – or take the next step

While there are many calculators and quick assessment tools online that can give you a rough approximation of how much you should save for retirement, it pays to create a detailed, comprehensive strategy. This will guide you to, and through, this important period of your life.

Whether you create a plan alone or in collaboration with a financial professional, be sure to seek out answers to the following questions:

1. Given my goals, timeline and financial situation, what investment strategies or retirement savings tools are best suited for me?
2. When is the best time for me to start taking Social Security benefits?
3. How can I minimize taxes in retirement?
4. Given my current and projected health status, what should I budget for healthcare in retirement?
5. How can I protect my assets during retirement?
6. What strategies should I have in place to manage market volatility and/or unexpected expenses?

If you’re working with a financial professional, ask about any fees and costs you should be aware of associated with your investments and/or with their services. Then, once you establish a baseline plan, schedule time each year to review the plan and align it with your goals and changing circumstances.

Much like a successful, fulfilling retirement, a retirement strategy works best when you take the time to tailor it specifically to your unique wants and needs. Congratulations on taking this important step for your future!

Prepare for your future, today. Add more freedom and flexibility into your retirement plan by learning the difference between a Roth and a traditional IRA (individual retirement account).

An IRA is a retirement account outside of a 401(k) created through your workplace or a retirement account that exists in place of having a 401(k). Contributing to an IRA can provide another way of adding to your savings while providing tax advantages.

How much you can contribute to an IRA is based on your income. In the 2023 tax year the maximum contribution is $6,500. If you are older than 50-years-old, you can contribute an added $1,000 per tax year. High-income earners are ineligible to use a Roth account or have limited access to them depending on income. These limits apply across all your IRAs, so even if you have multiple accounts, you can’t contribute more than the maximum.

When choosing to open an IRA, you’ll decide between a Roth and a traditional IRA. An Ameritas financial professional can help you choose the IRA that best meets your savings timeframe and financial situation.

What is a traditional IRA?

With a traditional IRA, taxes are deferred. That means taxes aren’t owed on either the money you contribute or the interest that it earns until you withdraw it from the account. Earnings are reinvested so your money has the potential to grow over time, potentially offering stronger long-term outcomes than taxable accounts. Read this blog to learn more about the power of tax-deferral.

Most people contribute to their traditional IRA using income that has already been taxed, generally by their employer, and then claim a tax deduction for the amount they contribute that year when they file their taxes.

There may be limits on the amount of your contribution that you can claim as a tax deduction. The deduction may be limited if you or your spouse is covered by a retirement plan at work and your income exceeds certain levels. If you want to claim a tax deduction equaling the amount of your contribution in the year you invest the funds in your traditional IRA, your income must be below a certain threshold, according to the IRS deduction limits.

Income includes:

• Wages.
• Commissions.
• Self-employment income.
• Taxable alimony and separate maintenance.
• Nontaxable combat pay.
• Taxable non-tuition fellowship and stipend payments.

You generally must start taking withdrawals, called required minimum distributions (RMDs) from your traditional IRA when you reach age 72 (73 if you reach age 72 after Dec. 31, 2022).¹

What is a Roth IRA?

Roth IRAs are funded with after-tax dollars—you’ve already paid taxes on the money you contribute. However, unlike a traditional IRA, the contributions are not tax-deductible, but once you start withdrawing funds, the money is tax-free, even the interest that your account has earned, as long as it’s not an early withdrawal.

Since the money you invest in a Roth IRA generally grows tax-free, earnings are reinvested so your money has the potential to grow over time, potentially offering stronger long-term outcomes than taxable accounts.

Roth IRA imposes restrictions set by the IRS each year. In the 2023 tax year, maximum contributions decrease if you earn above $138,000 as a single filer and $218,000 as a married couple filing jointly.

What’s the difference between a Roth and traditional IRA?

The differences between a Roth and traditional IRA primarily lie within the tax treatment of each.

• With a traditional IRA, you can receive potential tax deductions for your contribution now, whereas Roth contributions are made after you’ve paid taxes on them.
• For a Roth IRA, you don’t need to withdraw money at all, and a traditional IRA requires distribution after a certain age.

Some similarities exist between the two. In both cases:

• Both have tax advantages. Earnings are either tax-deferred with a traditional IRA (you pay taxes when earnings are withdrawn) or tax-free with a Roth IRA (you don’t pay taxes on the earnings).
• The early withdrawal penalty for both a traditional and Roth IRA is 10% of the earnings withdrawn before age 59½. The account also has to be at least five years old to avoid the penalty. Contributions can be withdrawn at any time without penalty. Some exceptions may allow penalty-free withdrawals in certain IRS-approved situations.

Why should I choose one over the other?

Why a traditional IRA? If you think you will contribute to the same tax bracket or a lower tax bracket by the time of your retirement, a traditional IRA might be most suitable. If you expect your tax rate to increase over time, contributing to a Roth IRA means you can take advantage of your lower tax rate now and not be taxed at a potentially higher rate when you retire.

Simply put, either enjoy the benefits of tax-free withdrawals in the future with a Roth or take advantage of tax benefits today with a traditional IRA.

Start saving early

Start contributing to an IRA, whether you choose a Roth or traditional, right away to begin accumulating savings for your retirement. Just getting started? Read this blog for helpful tips and the importance of starting young.

Ozark Motor Lines is a trucking transportation company with a rich family history. Ozark was started by the Higginbotham family out of Memphis, Tennessee in 1961. As the company grew, the Higginbothams knew the benefits of family business planning would be key to their success.

Tommy Higginbotham, chief executive officer of Ozark Motor Lines, recalls how the business got started, “My dad had worked for the Frisco railroad. He saw the need for a trucking company to run from West Plains, Missouri to Memphis, Tennessee. In July 1979, daddy sold my brother, Steve, and I the business.”

Reliable for generations

Steve and Tommy expanded Ozark on their dad’s strong values and debt-free growth principles. As Ozark grew, the brothers knew they needed a strong financial strategy for business, estate and employee benefits planning. They entrusted that business financial wellness plan to UCL Financial Group, LLC, a team that shares the same family business values.

UCL Financial Group is keenly aware of the benefits of family business planning. Bob Brown, Sr. CLU LUTFC, partner of UCL Financial Group started working with Steve and Tommy over 40 years ago. Now Bob’s daughter, Rebecca Brown Schulter, agent and financial planner, is in the business, too.

“When we first started with Bob we sat around our kitchen table,” remembers Tommy. “He explained life insurance to us and other insurance. They’ve been on the spot, timely with information so we can make what we think are the right choices for us personally and the employees.”

“Over the years, I’ve watched the phenomenal growth that those two boys, taken over for their dad, has taken Ozark to where it is today,” said Bob. “[Our company has] grown along with them. The third generation of the Higginbothams is emerging to take their company into the future, and the next generation of the Brown family is positioned to work with them, as well. We’re really proud of that.”

As Ozark has grown, the comprehensive personal planning for the family business has evolved and grown, too. Bob, Rebecca and their team provided small business estate planning, business planning with life insurance and necessary succession planning for family business.

Jason Higginbotham, chief financial officer and next generation of leadership at Ozark, is happy to have such a long-standing relationship with UCL Financial Group and the Brown family. He says it helps them maintain consistency and remember important decisions.

“There’s a lot of value to the partnership,” expressed Jason. “One, just the simple day-to-day expertise they have in insurance, financial products and helping us find solutions to our problems. Another great thing about having a generational partner with Bob, and now Rebecca coming in, is when you’re a long-standing business like us, sometimes you go, ‘How did we get here?’ You don’t always retain that knowledge internally. But not if you have long-term partners like Bob and Rebecca.”

Strong benefits program

UCL Financial Group also handles most of the employee benefits planning for the family business. Specifically, their small business 401(k) retirement plan helps Ozark recruit and retain drivers in an industry struggling to gain new employees. With strong trucking company benefits, Ozark is positioned well to continue attracting the talented and dedicated workers they need to run their business.

“I’d say that the 401(k) has had a positive impact on their ability to recruit drivers at Ozark, for sure,” explained Rebecca Brown Schulter. “They’re always looking to improve their plan and increase the match. We review it every year to make sure it’s performing how it should.”

Jason is proud of the strong benefits program they’re able to offer their employees. “We’re distinguished in our industry by how we treat our people and how we approach the business. The trucks, the trailers and all the stuff is just stuff. In the end, people are what make it all happen.”

Jason’s father, Tommy, couldn’t agree more.

“Hey, what I like the best about this is the great people I’ve been able to meet,” said Tommy. “We’ve been in business 58 years. I have grown up here. A life’s journey.”

UCL Financial Group is proud to help protect and grow this family-owned business through insurance, employee benefits and financial services. Ameritas is proud to be part of their story.

Read more about the benefits of small business planning and find helpful information for your growing business. Or, find a financial professional who can help.

Testimonial may not be representative of the experience of other customers. Testimonial is no guarantee of future performance or success.